Gold futures settle near five-month low

SAN FRANCISCO (MarketWatch) — Gold futures on Wednesday settled at their lowest level since early July, pressured by strength in the dollar as traders mulled the metal’s appeal against a backdrop of rising U.S. consumer sentiment as well as declines in durable-goods orders and a Chicago’s business gauge.

Gold for February delivery
US:GCG4
shed $3.60, or 0.3%, to settle at $1,237.90 an ounce on the Comex division of the New York Mercantile Exchange after touching intraday highs above $1,250. Prices settled at their lowest since July 8, according to FactSet data tracking the most-active contracts.

Trading on Comex will remain closed Thursday for the Thanksgiving holiday and there’s an early close for Friday’s session.

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The precious metal lost most of its shine from earlier trading “as the economic data in the U.S. started to hit the tape,” said Naeem Aslam, chief market analyst at AvaTrade.

A gauge of consumer sentiment rose to a final reading of 75.1 in November. MarketWatch-polled economists were looking for a final reading of 73.

A leading economic index climbed in October by 0.2% to 97.5. And applications for unemployment benefits fell for the sixth time in seven weeks, with claims falling by 10,000 to 316,000 in the week ended Nov. 23. MarketWatch-polled economists expected a rise to 300,000. A gauge of Chicago-area businesses fell to 63 in November, but was better than the market expected. Durable-goods orders dropped 2% in October, compared with expectations for a decline of 2.2%.

The “patchy data” are fueling the tapering argument among some traders, who already are holding big short positions on gold, Aslam said in an email interview. Traders have been studying the economic data for hints on when the Federal Reserve will begin to taper, or scale back, its bond-buying program.

“Given that we have subdued inflation in the U.S. and unwinding of ultra-loose monetary policy, the long-term trend could very well stay in play for gold — which is towards the downside,” said Aslam.

In the wake of the U.S. economic reports, particularly the better-than-expected Chicago PMI, the U.S. dollar index
DXY, -0.30%moved higher, weighing on dollar-denominated gold prices.

“Europe is very important to gold and silver,” said Chintan Karnani, chief market analyst at Insignia Consultants, in an email from New Delhi. “A stable growth-oriented euro zone and U.K. will result in a continued bearish trend for gold and silver and vice versa.”

On Comex, March silver
US:SIH4
fell 21 cents, or 1.1%, to $19.68 an ounce.

Looking a bit ahead, Karnani said “there is skepticism over the ability of gold and silver to rise in the month of December.”

“Short-term traders are using every rise to exit long positions in gold and also add short positions,” he said. “The fall in crude-oil prices has raised hopes of higher global economic growth, which is bearish for gold. Reduced inflation-related demand for gold is preventing new gold investors to make an entry.”

Gold demand from China, however, has been strong.

Analysts at Commerzbank AG pointed to data showing that China imported almost 1,000 tons of gold from Hong Kong in the first 10 months of the year. “The very high imports are primarily an expression of China’s undiminished appetite for gold,” the analysts wrote in a note. “Traders and jewelers continue to seize every opportunity to buy gold in response to noticeably increased demand among retail investors for jewelry, coins and bars in the wake of the price fall.”

Rounding out action on Comex Wednesday, March copper
US:HGH4
ended at $3.19 a pound, down almost 3 cents, or 0.9%. January platinum
US:PLF4
fell $19.20, or 1.4%, to $1,352.70 an ounce and March palladium
US:PAH4
fell $2.50, or 0.4%, to $715.95 an ounce.

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